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Hawaii was organized in December 1982 as a limited partnership
for the described purpose of conducting research and development
(R & D) involving the jojoba plant. The offering, dated October
28, 1982, provided for a maximum capitalization of $741,000
consisting of 260 limited partnership units at $2,850 per unit.
Each unit required a cash downpayment of $1,000 and a promissory
note in the principal amount of $1,850, requiring 12 semiannual
interest payments of $92.50 during the first 6 years and 40
quarterly payments of $73.70 for the following 10 years. The
promissory note contained an acceleration provision in the event
of default. The offering was limited to investors with a net
worth (exclusive of home, furnishings, and automobiles) of
$150,000, or investors whose net worth was $50,000 (exclusive of
home, furnishings, and automobiles) and who anticipated that, for
the taxable year of the investment, they would have gross income
equal to $65,000, or taxable income, a portion of which, but for
tax-advantaged investments, would be subject to a Federal income
tax rate of 50 percent.
Petitioners' investment was for one limited partnership
unit, which required an initial downpayment of $1,000 and
execution of a promissory note for $1,850. Petitioners were to
make 12 semiannual "interest only" payments for the first 6 years
and quarterly principal and interest payments for the following
10 years until the note was fully paid. The record is unclear as
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